My question concerns paying down a mortgage before filing. I found 2 legal references on the internet, which seem to be opposed.
1- If the motgege lender is fully secured, meaning that the value of your house is greater than your total mortgage debt, then you can pay down your mortgage debt, as much as you like.
2- A debtors transfer of cash to his mortgage, within 10 years of filing bankruptcy may be challenged by the trustee, as this may be an attempt to defraud creditors.
I live in Florida so my home is fully protected. I'm just not sure if I could put some money into my mortgage , before filing.
I can't see how it wouldn't be deemed a preferential/fradulent transfer
I would not file more than 1 payment ahead.
If you have money to get rid of, your creditors should get it equally.
You can’t even pay back your debt to your friends before paying others equally.
Obviously, the longer it has been between pay down, IRA deposits, etc to file date, the less questionable it becomes.
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Bankruptcy law restricts your ability to prefer a creditor by making a large payment to them before you file. More precisely, during the 90-day period prior to your filing, there are restrictions on making more than a regular monthly mortgage payment to your home loan lender. If the payment you made is deemed a preference, the bankruptcy trustee will require your creditor to pay the money back so that the trustee can distribute the money evenly to all of your creditors. Not a good idea. Plus you will have to decide to reaffirn the mortgage or not.
My experience is that every transfer greater than $600 will be questioned. I got a month ahead on the mortgage by paying an extra payment before filing, but the amount was equal to my normal payment so it was easy to explain. I also made several extra payments for student loans, again the amount was the same as my normal payment I just did a few extra payments. I also made a few extra insurance payments and did a few IRA contributions. Nothing really above the $600 mark. I did know I was going to file about 3 months before I filed so I spread these extra payments out over several months. In my case I was waiting to find a job and the money being used to make the extra payments came from liquidating a brokerage account and selling an extra vehicle. I didn't know exactly when I was going to get a new job, so to me those were things I needed to keep paying anyways.